Author’s Note: We have divided the full article into a three-part series to cover five tips in each section. From what to expect in a competitive negotiation and drafting a mediation summary, to setting bargaining points and techniques for preparing strong opening statements, this article covers practical tips that lawyers can apply immediately in their practices. I invite you to read the article and feel free to contact me with any questions. We’ll post Part II in a few weeks, so please come back to read more on this topic.
David P. Hathaway firstname.lastname@example.org
15 Tips for a Successful Mediation (Part I)
Civil lawsuits are most often resolved by a mediated settlement agreement, which could have an infinite variety of settlement numbers and terms. What result a party achieves, after months or even years of litigation, is in large part a function of what happens on the day of mediation. Mediation is therefore the most important day of the case. Ironically, most lawyers go through law school and their legal practice with no formal education or training on how to represent a party at mediation. They just watch others, whether good or bad, and learn the ropes over time. However, mediation is far too important to learn by trial and error, because it is the day where all the fruits of a lawyer’s labor are put to the test. Therefore, this article is meant to provide lawyers of all experience levels with some practical pointers on how to succeed at mediation and thereby better serve their clients and improve judicial economy as a whole.
Tip #1: Expect a Competitive Negotiation. Mediation is not a cooperative negotiation process. There are books about cooperative negotiation where both sides show all their cards and reach a “win-win” result. For example, if you had one orange and two people wanted it, rather than slicing it in half, both parties could come to the table and explain why they wanted the orange. It might be that one party intended to squeeze the juice and the other person wanted to use the rind for a cake. By sharing this information, the parties realize they don’t have to cut the orange in half, and can both get everything they wanted. This requires trust and honesty, and quite a bit of luck. By contrast, civil litigation is often about money, and therefore it is a zero sum game. That is to say, $100 out of your pocket will become $100 in my pocket, and the sum is zero. If one lawyer attempts a cooperative approach in mediation, he or she should not expect the other side to do the same. A competitive negotiator will clean the clock of a cooperative one. For example, if a cooperative negotiator explains that his client really needs only $1,500 per month to cover the remainder of the lease payments, the competitive negotiator might never offer a lump sum payment. For purposes of mediation, expect the negotiations to be competitive, not cooperative.
Tip #2: Don’t Drop Anchors. Negotiation begins long before mediation. An anchor is a number mentioned at some time in the lawsuit that the other side will no doubt remember many months later. Any number will sound like an offer, even if it is not. Attorneys may try to use qualifying language, like “my client might go to $100,000” or “I doubt he would go to $100,000,” but qualifiers fall on deaf ears. All the other lawyer hears is a possible settlement number, or an “anchor,” of $100,000, which has a powerful effect on where the case ultimately settles. In one study, lawyers were asked to value a rare jewel for auction, and were given information about its condition, rarity, age, maker, and comparable sales. They were handed a detailed questionnaire, which asked at the end, “Do you believe the value at auction exceeds $2,500?” There was a blank line for the attorney to give his or her best estimate of value, and the average number given was $1,800. Other lawyers were given the very same questionnaire but instead, at the end, it asked whether the value would exceed $5,000 at auction. The average estimate given on these forms was $4,200. The anchor, therefore, made huge impact on the lawyer’s valuation. If opposing counsel asks what your client might take, you may not want to give a number. For the plaintiff, you might indicate, “he is looking to recover the whole amount” or, for the defense, state “we are not looking to pay anything at all.” Of course, if you serve a proposal for settlement under Fla. R. Civ. P. 1.442, you will have to weigh the potential fee-shifting benefit of offering a settlement number with the drawback of dropping an anchor. Since the vast majority of cases are resolved in settlement rather than by court adjudication, which is where fee-shifting might occur, avoiding the anchor may be the weightier consideration.
Tip #3: Skip the Phone Debates. Just like dropping anchors, try not to engage in telephone debates with opposing counsel that reveal all your mental impressions about the case. If you concede one part of your case is weaker than others, you will have lost the force of those arguments at mediation. The same goes for those conversations in the courthouse before a hearing. There is obviously some merit to “feeling out the other side” and determining whether the lawsuit can be resolved earlier rather than later, but be careful of what information you share. Sometimes it is easiest to indicate that your position has already been stated in the pleadings. There was a scene in The Godfather where Sonny Corleone starts openly questioning a rival mob family’s proposal during a meeting with his father, and afterward, Don Vito Corleone tells his son never to let anyone outside the family know what he’s thinking. The same can be true in civil litigation, both in sharing thoughts about the case and even in proposing mediation. If your client wants to go to mediation, be careful how you communicate it to the other side, because sometimes it can be perceived as a sign of weakness. Some lawyers even confirm in writing that it was the other attorney who suggested mediation. In Florida, mediation is required before trial, but remember not to mediate too early, before the parties have bled enough, or too late, when the parties end up fighting mostly over the legal fees. In your communications with opposing counsel regarding the merits of the case or the prospects for mediation, less is more.
Tip #4: Guard Against Overconfidence. Studies show that lawyers are overly optimistic about both their chance of winning and the damages recoverable. In one study, lawyers were asked to pretend they were a sports agent for a starting pitcher in Major League Baseball negotiating against his team. The agent’s last offer for the pitcher’s contract was $6.75M and the team’s last offer was $4.25M. The average contract for a pitcher with your client’s win-loss percentage was $5.375M. In a process called “baseball arbitration,” each side submits a confidential proposed outcome and the arbitrator can choose only one offer or the other; he has no other option. In this hypothetical, the lawyer submits a number and is asked to give a percent likelihood that the arbitrator will choose his number rather than the team’s number. In filling out the questionnaire, lawyers on average were 78.5% confident that their number would be selected. In actuality, anything over 50% is wishful thinking. Even very experienced lawyers make this mistake. Anything can happen at trial, and because a strong case on the merits could fail for some reason no one considered, your best estimate for success should be around 50%. Also keep in mind that experience may boost confidence, but it does not necessarily improve ability. Some lawyers have been making the same mistakes for 30 years of practice, and one of those mistakes is being overly confident of an outcome at trial.
Tip #5: Make a True Case Valuation. A true valuation of a case is the present value of a future outcome. If you represent a plaintiff who can potentially establish $1M in damages, it would be inaccurate to simply conclude that the case is worth $500,000 because each side has a 50% chance to win at trial. One reason is that parties fail to consider the recovery may be $1M or much less. If you made a bar chart, starting at zero and ending at $1M, you might see a peak in the middle, where a recovery of $500,000 is more likely than a recovery of $250,000 or $750,000. To make an accurate valuation of a case, you should first estimate the likelihood of recovering different amounts if you won the case (for example, 30% at $1M, 40% at $500k, and 30% at $250k). As stated above, guard against overconfidence. Take the average, and then multiply by chance of actually winning the case (say, 50%). Finally, deduct the anticipated future litigation expenses including legal fees and costs from the date of mediation through trial (say, $75,000). You will find that your $1M case is more accurately worth around $217,000, not $500,000. Never lowball the fees and costs, and be sure both the lawyer and client have previously discussed the anticipated future legal expenses; it should not come as a shock to the client on the date of mediation. Also remember the value of a case may change significantly over time. New testimony and court rulings can substantially affect all three variables – your estimate of the recovery percentages, the chances of winning on liability, and the legal expenses required to get through trial. The value to use at mediation is the value of the case on that day.